The pandemic and its economic implications have put current financial wellness and future retirement dreams at risk for many Americans. Those who lost their jobs or a portion of their income due to COVID-19 are particularly concerned about their future financial situation.
The pandemic has taken a toll on retirement confidence and reversed a trend of increasing confidence going back to 2013. Secure Retirement Institute® (SRI®) research finds just 49% of consumers feel confident they will be able to have the retirement life style they desire, down 6 percentage points from just a year ago. For the 4 in 10 (39%) consumers who lost a job or income since the outbreak of COVID-19, retirement confidence dropped to 42%, down almost a quarter from a year ago.
SRI also asked workers about their retirement savings and participation in workplace retirement savings plans. When it comes to access and participation in a defined contribution plan, non-disrupted workers fared much better than those who experienced a loss of income or job. Out of all workers, 64% are currently contributing to a plan. Seventy-one percent of non-disrupted workers are currently contributing, but only 54% of disrupted workers manage to contribute to a retirement plan.
When asked about the impact the COVID-19 outbreak has had on their ability to save for retirement, 44% of workers found the impact to be “somewhat” or “significantly” negative. Among workers experiencing a job disruption, almost 7 out of 10 (69%) say their ability to save has been negatively impacted. Only 28% of non-disrupted workers report a negative impact.
“When it comes to retirement savings, not everyone has (or has been able to) consistently put aside some of their income on a regular basis,” said Alison Salka, senior vice president and director, LIMRA Research.
As of July 2020, SRI found 1 in 5 workers have less than $5,000 in household retirement savings; and nearly 3 in 10 (29%) workers lacked an emergency savings fund. Even among workers with emergency savings, most (59%) will exhaust their savings before six months have passed.
“Many Americans will need significant help recovering from the pandemic fallout,” Salka notes. “Approaches to financial wellness need to be more holistic and ideally include steps to improve short-term financial security as well as long-term savings.”
These are the finding of a Secure Retirement Institute® (SRI®) study, Retirement Landscape 2020: Impact of COVID-19 and the Retirement Savings Conundrum, fielded in late July and early August 2020 in the midst of the pandemic.